Chapter 11 Bankruptcy
Bankruptcy for Businesses

Chapter 11 Bankruptcy

Federal bankruptcy laws govern how companies go out of business or recover from crippling debt. A bankrupt company, the "debtor," might use Chapter 11 of the Bankruptcy Code to "reorganize" its business and try to become profitable again. Management continues to run the day-to-day business operations but all significant business decisions must be approved by a bankruptcy court.

Chapter 11 bankruptcy is the type of bankruptcy used by financially struggling businesses such as companies in the Airline Industry to reorganize their affairs. It is also available to individuals. Individuals who consider Chapter 11 bankruptcy usually have debts in excess of the Chapter 13 bankruptcy limits or own substantial nonexempt assets, such as several pieces of real estate.

The initial filing fee for Chapter 11 is currently about one thoustand dollars, and you must also pay a quarterly fee that is a percentage of your debts until your reorganization plan is approved or dismissed; if you don't continue to pay, your case is converted to Chapter 7 bankruptcy.

You need a lawyer to file for Chapter 11, and most attorneys require a minimum retainer fee to handle one. Add to that the Chapter 11 bankruptcy court fees, which, one year after you file, could run you several thoustand dollars.

A Chapter 11 bankruptcy often turns into a long, expensive affair, and many Chapter 11 filings end up being converted to Chapter 7 bankruptcy.

New Bankruptcy Bill

On March 10 the U.S. Senate, by a 74 to 25 vote, passed a bill that would significantly change bankruptcy rules. Should the bill be enacted into law, it would create the greatest change in U.S. bankruptcy law in 27 years. The House is expected to easily pass this legislation, which is part of President George W. Bush’s domestic agenda for his second term. The Senate bill contains limitations on who can file under Chapter 7 and what would be required for repayment under Chapter 13. At this time most bankruptcy filings fall under Chapter 7 but due to a recent bill passed by the Senate alot more of us will be forced into a Chapter 13. This bill will go into effect early April 2005.

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